Impact of audit committee attributes on financial distress: Evidence from Pakistan

Khalid, Muqaddas; Abbas, Qaisar; Malik, Fizzah

doi:10.1142/s242478632050005x

Cited by 11 publications

(14 citation statements)

References 34 publications

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“…Coinciding with Rahmat et al (2009) and Khalid et al (2020), this research finds out that there is no significant relationship between SMEs’ financial distress and AUDSIZE. Hence, the agency theory is not supported by result since it requires small audit committee to fulfill their monitoring rules for firms to avoid financial distress.…”

Section: Resultssupporting

confidence: 72%

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Non-financial variables related to governance and financial distress prediction in SMEs–evidence from Egypt

Ragab

Saleh

2021

JAAR

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PurposeThis study examines the effect of non-financial variables related to governance on the accuracy of financial distress prediction among Egyptian listed small and medium-sized enterprises (SMEs), by using the logistic regression technique.Design/methodology/approachThis study used a sample of 24 Egyptian-listed SMEs in each year, totaling 120 firm observations, of which 25 were classified distressed and 95 of them non-distressed between 2014 and 2018. The variables for the study included five financial variables and thirteen non-financial variables related to governance. The models were developed using financial variables alone as well as combining financial and non-financial variables related to governance.FindingsThe results showed that the model with financial variables had a prediction accuracy of 91.7% , whereas models with a combination of financial and non-financial variables related to governance predict with comparatively better accuracy of 92.7 and 93.6% .Research limitations/implicationsAlthough the results seem to be conclusive, it could be noted that the non-distressed sample was not paired with the distressed sample. Other studies showed that paired samples increase the financial distress prediction rate. Furthermore, due to the small sample size, this study was unable to create a hold-out sub-sample for the accuracy test.Practical implicationsThe proposed distress prediction model for SMEs is effective for stakeholders, including banks and other financial institutions, in the assessment of the credit risk of SMEs. Using such a model, they could better identify SMEs with a higher risk of failure in their lending decisions. Moreover, SME managers' could be interested in using such models as a tool for planning corrective action, in addition to planning and controlling current operations to avoid financial failure in the future.Originality/valueThis study contributes to financial distress prediction literature in different ways. First, few studies were conducted in the area of financial distress among SMEs. Second, neither of these studies was conducted within the Egyptian context, nor any of them had used non-financial variables related to governance in the prediction of financial distress among SMEs.

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Section: Resultssupporting

confidence: 72%

“…Empirically, Rahmat et al (2009) and Khalid et al (2020) find that there is no significant relationship between SMEs' financial distress and audit committee size. 2.2.2.3.3.…”

Section: 22mentioning

confidence: 99%

Non-financial variables related to governance and financial distress prediction in SMEs–evidence from Egypt

Ragab

Saleh

2021

JAAR

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“…Many studies have been conducted in the local context to examine the impact of effective governance mechanisms on the likelihood of FD and have concluded that an efficient governance structure not only improves a firm financial performance but also protects it from FD (Jamal and Shah, 2017;Taj et al, 2017;Udin et al, 2017;Khurshid et al, 2018;Khalid et al, 2020;Farooq et al, 2020). Management is expected to use CSR activities to align the interests of various stakeholder groups in an effective governance structure, thereby indirectly protecting the firm from distress.…”

Section: Corporate Social Responsibility Financial Distress and Corpo...mentioning

confidence: 99%

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Farooq

Noor

Maqbool

2023

SRJ

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Purpose This study aims to investigate the impact of corporate social responsibility (CSR) on the financial distress (FD) of firms listed on the Pakistan Stock Exchange (PSX). Furthermore, the moderating effect of corporate governance (CG) on the CSR–distress relationship is investigated in this study. Design/methodology/approach The final sample of the study includes 117 companies from 2008 to 2021. The sample firms' CSR engagement is assessed using a multidimensional financial approach, and the likelihood of FD is determined using Altman's Z-score. The governance level is measured using the governance index, which includes 29 governance provisions. To achieve the research objectives, the system generalized method of moments estimator is used. Furthermore, several tests are performed to assess the robustness of the study's findings. The analysis was carried out using STATA software version 15. Findings The authors find that CSR is significantly inversely related to FD. The governance mechanism was discovered to be inversely related to FD. Furthermore, corporate governance strengthens the negative relationship between CSR and FD. In addition, the authors find that CSR is significantly inversely related to FD in firms with strong CG mechanisms but has no effect on FD in firms with weak CG mechanisms. Practical implications The findings of this study provide policymakers, business managers, regulators and investors with a better understanding of the relationship between the quality of CSR investments and the likelihood of FD in Pakistani firms, as well as the role of CG in this context. Originality/value This study contributes to our understanding of the role of CG in the CSR-distress relationship in an emerging market. This suggests that policymakers should prioritize CG quality while anticipating the impact of CSR on corporate FD.

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“…Variabel ini digunakan untuk mengontrol pengaruh ukuran perusahaan terhadap variabel yang diteliti. Variabel ini diukur dengan me-log-kan total asset (Khalid et al, 2020). Leverage adalah variabel yang menunjukkan seberapa besar komposisi utang yang dimiliki perusahaan.…”

Section: Definisi Dan Pengukuran Variabel Real Earning Managementunclassified

“…leverage merupakan variabel kontrol yang digunakan untuk mengontrol pengaruh besaran liabilitas perusahaan terhadap variabel yang diteliti. Variabel ini diukur dengan membagi total hutang dengan total asset (Khalid et al, 2020)…”

Section: Definisi Dan Pengukuran Variabel Real Earning Managementunclassified

Pengaruh Komite Audit dan CEO Tenure Terhadap Kualitas Laporan Keuangan

Sumayyah

Ladepi

2024

Wahana

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This study investigates the effect of committee audit on the quality of financial statements with proxies of real earnings management, and CEO tenure involvement in real earnings management for firms listed in Indonesia Stock Exchange (IDX). The study uses a sample of 265 observation of publicly listed companies on the IDX for the fiscal year that ends on December 31, 2017 through 2019. The data analysis technique used is multiple linear regression analysis using eviews statistic. The result show that audit committee negatively affects real earnings management while CEO tenure positively affects real earnings management practices.

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Impact of audit committee attributes on financial distress: Evidence from Pakistan

Cited by 11 publications

References 34 publications

Non-financial variables related to governance and financial distress prediction in SMEs–evidence from Egypt

Non-financial variables related to governance and financial distress prediction in SMEs–evidence from Egypt

How does corporate social responsibility affect financial distress? The moderating role of corporate governance

Pengaruh Komite Audit dan CEO Tenure Terhadap Kualitas Laporan Keuangan

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